Corporate income tax
The general rate of Corporate Income Tax (CIT) in the Ukraine is 25%. CIT is payable by Ukrainian resident companies, as well as permanent establishments of non-resident companies in Ukraine on real estate rental and sale income. The tax is reportable to the Ukrainian tax authorities on a quarterly basis.
Non-resident companies doing business in the Ukraine are liable to 15% withholding tax on all income received from real estate located in the Ukraine, including any income from the sale of real estate. The withholding tax rate may be reduced according to Double Tax Treaties where applicable.
Capital gains
Capital gains realised by companies resident in Ukraine or non-residents operating in Ukraine through a permanent establishment on the sale of real estate located in the Ukraine are subject to 25% CIT. In the case of non-resident companies, such gains will be subject to 15% withholding tax.
Capital gains realised on the sale of shares in a real estate owning company will, in principle, be taxed in the same way as a direct disposal of real estate (see above). However, there is no mechanism in Ukraine for taxing capital gains arising on transactions between non-residents provided that the transaction occurs outside of Ukraine.
Property tax
Land tax is charged annually on land (not buildings) located in Ukraine. Tax rates depend on the category and location of land. If the land has an estimated value then the land tax is calculated as 1% of that estimate.
Otherwise, the rate of land tax ranges from UAH 0.015/m2 (approx. USD 0.003/m2) to UAH 0.21/m2 (approx. USD 0.042/m2), depending on the location of the property. For “regional centers” (equivalent to state capitals or major regional cities), the tax is rate is increased from 1.2 to 3 times the usual rate.
Property transfer tax
The following duties and levies are applicable on the direct disposal of real estate:
- State duty at 1% of the contract price (the law does not specify which party is liable for the payment of state duty. However, the parties to the transaction generally agree to a 50:50 split).
- Pension fund levy at 1% of the contract price, for which the buyer is liable. This levy is not applicable on the sale of land.
In order for sale and purchase agreements between related parties to be authorised by the Ukraine authorities, transactions must be carried out at “arm’s length”, i.e. Property must be transferred at market value.
The transfer of shares in a real estate owning company is not subject to any transfer tax in Ukraine.
VAT
The leasing of real estate (including land) is subject to VAT in Ukraine at the standard rate of 20%. The transfer of shares in a real estate owning company is exempt from VAT.
The sale of real estate, except for the sale of land alone, is subject to VAT at the rate of 20% charged on the contract price. If the value of the land on which a building is constructed is included in the sale value of the building then the whole transaction will be VATable at the rate of 20%.
VAT can only be paid by a taxpayer who has been registered for VAT purposes with the Ukrainian tax authorities. Registration is required if profits within the last 12 months exceed the threshold of UAH 300,000 (approximately USD 60,000).
The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.